Vince Kingston

 Many of you may already know that homeownership provides the largest single tax deduction most will ever qualify for.  100% of your mortgage interest payments are tax deductible in addition to your property tax and mortgage insurance payments (note the deduction for mortgage insurance is phased out for taxpayers with adjusted gross incomes of over $100,000).  For example on a $300K home purchase with 3.5% down payment using a 5.25% interest rate, you would have an annual tax deduction of over $19,000.  This means you would have an itemized deduction on your tax return of $19,000.  However when you itemize you forgo your standard deduction which is $5450 for 2008.  This still leaves you a net tax deduction of $13,550.  If you are in the 25% marginal tax bracket, that means you can reasonably expect to save approximately $3300/year in income that your are currently losing in taxes.  This translates into tax savings of $280/month meaning it will offset approximately 15% of your new mortgage payment.  Thanks Uncle Sam! 

What many people are not aware of is that as a W2 employee you can take advantage of these tax savings immediately and realize them on a monthly basis instead of waiting for your refund check at the end of the year (which essentially means loaning Uncle Sam your money interest free for a year).  After breaking down your annual tax savings into monthly increments as we did in the above example, you can simply claim more exemptions on your W9 up to the point where you are receiving that amount of additional income every month.  This way you achieve your tax savings immediately month to month (helping to offset that new mortgage payment).  Remember I am not a tax professional and this is not intended to be tax advice; I encourage you to discuss this strategy with your tax professional first.

I am always available for your questions.  You can contact me anytime at 971-221-8525 or This e-mail address is being protected from spambots. You need JavaScript enabled to view it